United States Dollar Index stays higher before US PCE inflation data

• 3.75%–4.00% remains the Fed’s policy rate range. The widely expected hold leaves the US Dollar Index firmer.
• Despite steady employment and economic growth, the Fed suspended rate increases to collect more evidence on persistent price pressures.
• Two officials dissented in favour of an immediate rate rise; Chair Warsh reiterated the Fed’s 2% inflation objective.

102.30 is the level around which the US Dollar Index (DXY) is trading in Thursday’s European session. Following modest losses the day before, the index is holding steady. It tracks the US Dollar (USD) against six major currencies.

With the Federal Reserve (Fed) delivering the widely anticipated rate hold but offering little guidance on its next policy step, the Greenback traded sideways. Attention now turns to the forthcoming US Personal Consumption Expenditures (PCE) price index. Traders are looking to the Fed’s preferred inflation gauge for a clearer indication of the monetary policy outlook.

Economic activity continues to grow, the Fed said as it left rates at 3.75%–4.00%. Its official statement pointed to resilient domestic spending, strong capital investment and robust productivity growth. On its labour market mandate, the central bank noted that employment gains have matched workforce growth, with little movement in the unemployment rate.

Although inflationary pressures remain elevated, the Fed opted to suspend further rate increases while collecting more data and evaluating the appropriate policy stance. Two officials opposed the decision. Fed Governor Lisa Cook and Cleveland Fed President Beth Hammack both voted for an immediate rate rise.

A strong underlying economy remains in place, Fed Chair Kevin Warsh stressed as he reiterated the Federal Open Market Committee's commitment to price stability and its 2% inflation target. He also set out the forthcoming meeting schedule: the Fed will meet eight times next year, including once without a formal vote. For 2028, he expects six policy-setting meetings.

102.30: Technical Outlook

Trading at 102.30 on the daily chart, Dollar Index Spot retains a bullish near-term bias. The price remains above both the nine- and 50-day Exponential Moving Averages (EMAs), indicating a positive underlying trend. At 60.01, the 14-day Relative Strength Index (RSI) is well above the neutral 50 threshold. This suggests upward momentum persists despite the recent consolidation.

The nine-day EMA near 102.06 provides the first downside support, followed by a lower technical floor at the 50-day EMA around 101.20. Resistance is indicated by the FXS Fed Sentiment Index at 141.89. Given that substantial gap, the Dollar Index could edge further upwards in the near term, with the short-term EMAs providing dynamic support.

Two dissents as Fed holds rates; FOMC keeps December hike in view

Leaving US monetary policy unchanged at its latest meeting, the Fed delivered a decision that Rabobank analysts describe as “slightly less hawkish” than expected. A modestly softer committee stance was evident in the fact that “just two FOMC members dissented to vote for a hike,” they note. Even so, further tightening remains firmly in prospect despite the pause. As Rabobank observes, “FOMC Chair Warsh did prepare markets for another hike in December,” maintaining the possibility of another increase.

(The technical analysis of this story was written with the help of an AI tool. Know more.)